Hanjin cargo terminal delayed up to two years at JaxPort

Monday

Jan 24, 2011 at 2:10 PM

David Bauerlein

The latest delay in building a Jacksonville cargo terminal for Hanjin Shipping Co. raises the stakes for deepening the ship channel because Hanjin wants dredging of the St. Johns River and construction of the terminal to occur simultaneously.

JaxPort officials agreed with Hanjin to push back the schedule for design and construction of the $300 million terminal by 18 months to two years, officials said Monday. JaxPort officials had planned to award a design contract this year with an expected opening date of the terminal in late 2014.

The new target of 2016 would dovetail with a scenario in which the federal government finishes deepening the ship channel the same year, allowing the jumbo-sized ships deployed by Hanjin to sail up and down the river.

However, deepening of the ship channel still must undergo an intensive study by the Army Corps of Engineers, slated for completion in 2014, and then win congressional authorization and funding. JaxPort will compete with other entities nationwide so there is no guarantee as to when a deeper channel for Jacksonville would get funding. The estimated cost would be $500 million to $600 million, with the federal government and the port authority sharing the expense.

Along with the TraPac terminal that opened in 2009, the planned Hanjin terminal is the cornerstone of Jacksonville's bid to become a top-tier East Coast port by handling cargo containers shipped on trade lanes with Asia.

JaxPort board chairman David Kulik said the port authority and Hanjin agree it's not financially feasible for construction of the terminal to move forward on a faster track than deepening of the channel.

"It's a delay, but I think it's a delay for the right reasons," Kulik said.

He said the timetable highlights the importance of securing state and federal financial support for port expansion so Hanjin will put its cargo hub and the associated jobs in Jacksonville.

"We're not trying to put dates out there that are unrealistic," he said. "But we are on the clock, so to speak."

It's not clear what Hanjin's response would be if the channel isn't deepened by 2016. That target date isn't part of the lease agreement signed two years ago between Hanjin and JaxPort. But JaxPort officials said they expect there will be changes in the lease to reflect the discussions that have occurred with Hanjin. The company's officials were not at the Monday meeting and could not be reached for comment.

Kulik said if other Southeast ports think there is an opening to woo Hanjin while Jacksonville awaits a deeper ship channel, he would tell them Hanjin and JaxPort "have the best possible relationship."

"I can tell you Hanjin is committed to this project," said Roy Schleicher, executive vice president of the authority.

When JaxPort and Hanjin signed a lease agreement in December 2008, they expected the cargo terminal would open in late 2011, years before the river could have been deepened. JaxPort said in the agreement it would make a sustained effort to get the 40-foot channel deepened to 50 feet. If Congress hasn't passed legislation by 2020, both sides would meet about changing terms of the lease, according to the agreement.

JaxPort officials said Hanjin cannot stick with that plan of operating the terminal for several years before the channel is deepened because Hanjin is aggressively increasing the size of its ocean-crossing cargo ships. If the ship channel is not deepened, Hanjin wouldn't be able to deliver enough cargo through Jacksonville to make it financially feasible for Hanjin to cover the annual lease payments required by the agreement.

Those lease payments are what the port authority would use to pay off the debt for building the cargo terminal.

The immediate impact of the new timeline is the port authority will pull the plug on plans to award a contract this year for design of the terminal. The port had postponed selecting a firm for a year so Hanjin and the International Longshoremen's Association could negotiate a labor pact.In December, the port board authorized the start of negotiations with Halcrow Inc. to do the design. But the port authority will start over again in 18 to 24 months with the selection process because of the delay.

The postponement also means the port authority will be able to wait longer before demolishing the current cruise terminal, which is located west of the Dames Point bridge on land that will become the site for the Hanjin terminal.

The postponement will not affect the ongoing study of deepening the channel, according to the U.S. Army Corps of Engineers.

In other business Monday, Chief Executive Officer Paul Anderson promoted Schleicher to executive vice president. Schleicher had been chief commercial officer and will be the authority's second-in-command, Anderson said.

david.bauerlein@jacksonville.com, (904) 359-4581

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